Man Bites Dog? Corporations Ask for Regulation

The lead story in today’s New York Times reports something we’ve been writing about here at the Pump Handle for quite some time (here and here and here, for example): responsible corporations recognize the need for public health and environmental regulation.

In industry and after industry, corporations and trade associations are asking the Bush Administration for regulation. In some of these cases industry has realized that voluntary regulation has failed, and without mandatory regulation, consumers will reject their product. But some of the push for federal regulation is to pre-empt more stringent state or local regulation, or eliminate law suits against polluters or manufacturers of dangerous products.

In the long article, accompanied by a graphic describing the pro-regulatory efforts of a host of industries, The New York Time’s Eric Lipton and Gardiner Harris write:

After years of favoring the hands-off doctrine of the Bush administration, some of the nation’s biggest industries are pushing for something they have long resisted: new federal regulations.

For toys and cars, antifreeze and fireworks, popcorn and produce and cigarettes and light bulbs, among other products, industry groups or major manufacturers are calling for federal health, safety and environmental mandates. Some of those industries are abandoning years of efforts to block such measures, often in alliance with the Bush administration, which pledged to ease what it views as costly, unnecessary rules.

The consequences for consumers, though, are not yet clear. The tactical shift by industry groups is motivated by a confluence of self-interests: growing competition from inexpensive imports that do not meet voluntary standards, and a desire to head off liability lawsuits and pre-empt tough state laws or legal actions that were a response to laissez-faire Bush administration policies. Concerns that Democrats could soon expand their control in Washington have also prompted manufacturers or producers to seek regulations that they consider the least burdensome, regulatory experts say.

“There seems to be, at the moment, a fair amount of efforts under way by individual industries to put into statute what had either previously been voluntary consensus standards or industry goals,” said Rosario Palmieri, a regulatory lobbyist at the National Association of Manufacturers, which has often opposed government regulations. “This year, we have seen quite a bit of it.”

There’s plenty of evidence that voluntary health and safety standards have never been effective. But now, with Asian imports undercutting domestic manufacturers, US firms are begging for regulation:

The all-terrain vehicle industry for years opposed mandatory standards dictating the way they build their machines. But the industry has changed course as it lost market share to lower-priced Chinese-made A.T.V.’s that do not meet voluntary standards, including some with inadequate brakes and top speeds that exceed guidelines.

“When you move from voluntary to mandatory you give the government policing power to make sure that products on the market meet safety standards — so we are all on a level playing field,” said Tim Buche, president of the Specialty Vehicle Institute of America, which represents companies that manufacture A.T.V.’s in the United States.

[snip]

The slow response by the Bush administration to several of these proposals has been a source of frustration to some industry groups.

“We have had a very, very uphill battle trying to get regulation,” said David H. Baker, a lawyer for the Lighter Association. The organization, representing cigarette lighter manufacturers, has been seeking a mandatory standard because unsafe, inexpensive Chinese imports were flooding the market, but staff members at the Consumer Product Safety Commission recommended against such a rule, saying the number of deaths and injuries did not justify it.

Fear of stronger state or local regulation is also driving these efforts:

The willingness of state legislators to enact their own regulations or attorneys general to join together to go after companies has also inspired industry groups to seek new federal regulations. California and Oregon, for example, enacted laws requiring antifreeze manufactures to include a bitter-tasting additive to their formulas to help prevent children and pets from drinking it. That was enough to convince the trade group to drop its opposition to a federal standard and come forward in an alliance with the Doris Day Animal League to propose a new mandate, which included liability protection against any claims filed related to the change in the formula. Environmental groups, though, object to the proposed solution, saying the additive could pollute water.

There is nothing new here, of course. In the middle 1970s, for example, labor unions and local Committees for Occupational Safety and Health (COSHs) demanded “the right to know,” asserting that workers could not be protected if they did not know the names and properties of the hazards to which they were exposed, and their employers had no legal obligation to inform them. In full agreement, Dr. Eula Bingham, the head of OSHA under President Carter proposed making it a federal requirement that chemicals be identified and labeled. That was 1977.

When Reagan-appointed Labor Department officials shelved the proposal, states and cities around the country started enacting their own right-to-know laws. The chemical industry, recognizing the problems associated with meeting numerous different locality-specific laws, pushed OSHA to issue a national hazard communications standard, which the Reagan Administration finally did in 1983.

industry officials, consumer groups and regulatory experts all agree there has been a recent surge of requests for new regulations, and one reason they give is the Bush administration’s willingness to include provisions that would block consumer lawsuits in state and federal courts.

Such pre-emption clauses were included, for example, in a drug label rule issued by the Food and Drug Administration in 2006 and in a new fire-prevention standard for mattresses imposed by the Consumer Product Safety Commission in July, said David C. Vladeck, a professor at the Georgetown University Law Center.

The pre-emptions bar consumers from filing liability claims in courts and supersede any tougher state regulations, extremely valuable protections for a major manufacturer, Mr. Vladeck said. “This is Christmas,” he said of industry, “this is their wish list.” A number of businesses are seeking such pre-emptions, though the clauses are being challenged in many courts.

What lessons can we take from these developments? The first is that we need to continue to encourage state and local governments to develop their own approaches to regulation, not only to protect local community health and environment, but also because local laws play an important role in forcing national change.

The second lesson is that lawsuits not only provide compensation for victims of misbehavior and malfeasance, but they also serve as an important incentive for good corporate behavior. Corporations that do not have to bear the costs of injury and illness caused by their products have less reason to make safer products.

In this era in which our public health and environmental agencies are run by anti-regulatory zealots who simply ignore hazards and refuse to issue badly needed standards, lawsuit preemption is hazardous to the nation’s health.

Update (9/17/07):
In an article with the same theme (corporations ask the Bush Administrations for regulation) but focusing only on the food industry, Jane Zhang of the Wall Street Journal writes that:

Food makers’ taste for government regulation is changing.

The Grocery Manufacturers Association, the industry’s largest trade group, tomorrow will unveil a proposal to beef up federal oversight of imported food and ingredients. Under a public-private partnership, the system would require the industry to adopt food-safety measures such as product tests and checks on foreign suppliers.

Representing companies ranging from Kraft Foods Inc. and Coca-Cola Co. to smaller, family-owned companies, the GMA is also lobbying Congress for more funds for the Food and Drug Administration, and it is working with federal and state officials and other groups toward a model regulation for farms and packing houses around the country.

“It’s in our interest to have a strong FDA,” said GMA President Cal Dooley, a former California congressman. “We need to have consumer confidence in the food products.”

Several other grower and processor groups are seeking tighter oversight. In Florida, tomato growers such as Tony DiMare, who fought numerous government attempts over the years to intervene in his industry, helped persuade the Florida legislature to change the law so the state can regulate growers and packers.

Meanwhile, the seafood industry is lobbying Congress for legislation that would require importers to register with the government and be certified before sending seafood to the U.S. It is also seeking to increase the FDA’s funding next year by $200 million so its inspectors can travel overseas to examine plants.

These efforts mark a sea change for the traditionally regulation-averse food industry. Behind the shift is an increasing awareness among industry executives that, with several major food-contamination cases recently shaking consumer confidence and damping sales, their push for greater deregulation is hurting themselves.

In the vacuum of strong national regulation, states, food processors and retailers are imposing their own rules and requirements to ensure product safety. Complying with the resulting web of rules is proving expensive and difficult for many food makers, however.

Industry’s new embrace of regulation presents both challenges and opportunities. I believe that as the political functionaries who direct the regulatory agencies begin to pack their bags, they will devote their remaining resources to simply reward their friends and core constituents.David Michaels heads the Project on Scientific Knowledge and Public Policy (SKAPP) and is Professor and Associate Chairman in the Department of Environmental and Occupational Health, the George Washington University School of Public Health and Health Services.

2 comments

Fear of state regulation (if it’s true) is likely because the bigger population states – Cal, NY, Ill – are more likely progressive. And, corporations for now control the Federal government, and have constricted the Federal Agencies ability to set standards and the standards they can set.

Even so, corporations don’t fear the states the way they fear the Federal government.

— Does “self regulation” mean that “the market is working?” Clearly not, if US Corporations can’t also control foreign competition. And this problem is not just limited to toys and other imported products. Even chemical plants and refineries can be outsourced if the regulatory (or self-regulatory) burden is too great.

— By definition, voluntary self-regulation — even at its best — seeks the lowest common denominator. Envorcement is difficult at best, and impossible when dealing with foreign competition or small companies who don’t care if they’re part of “the club.”

— While it’s true that large lawsuits strike the fear of God into corporate American, they have more often addressed this fear by “tort reform” campaigns that weaken the ability of citizens to sue, matched by attempts to weaken the ability of regulatory agencies to issue strong regulatory protections.

— Putting pressure on from the outside (e.g. from the states) can be effective, but again, corporate America is fighting this by seeking legislative pre-emption of the ability of states to go beyond federal regulation. (e.g. See the chemical industries attempts to pre-empt New Jersey’s chemical plant security regs.

— The lesson(s) here: Along with defending and strengthening the ability of our regulatory agencies to do their jobs, we need to defend the rights of states to do the same, and protect the tort system. At the same time, we need to organize on the local as well as the national level.

— Finally, these are lessons that apply not just to Republican administrations. Even some Democrats can be vulnerable to “the logic of the market” unless they continue to hear from the real victims.